Indonesia files criminal case against Google over tax underpayment

20 Sep 16

Indonesia is launching a criminal case against Google's parent company Alphabet with hopes of obtaining five years’ worth of back taxes, a senior government tax official has told Reuters.

If found guilty of avoiding payments, the firm could have to pay up to four times the amount it originally owed. This would mean a bill of $418m for 2015 alone.

“Google’s argument is that they just did tax planning,” Muhammad Hanif, head of the Indonesian tax office’s special cases branch told the news agency. “Tax planning is legal, but aggressive tax planning – to the extent that the country where the revenue is made does not get anything – is not.”

The Indonesian tax office alleges that Google paid less than 0.1% of the total income and value added taxes it owed in 2015. Most of Google’s Indonesian revenue is booked at the firm’s Asia Pacific headquarters in Singapore.

Indonesian authorities took the rare move to pursue a criminal case against Google after the company’s Asia Pacific headquarters declined to be audited in June.

Google has said the firm will cooperate with the government, but that it has paid all applicable taxes in Indonesia.

Hanif said that along with Facebook, Google accounts for around 70% of an advertising industry for online content providers worth an estimated $830m annually, although other studies have put the figure at less than half of that.

The Indonesian government is also planning to go after back taxes from other companies in the industry, and planning new regulation to ensure they are subject to taxation, Hanif added.

The news follows an order for Apple to pay 12bn yen ($118m) in additional tax in Japan earlier this week.

The country’s tax authorities said that billions of yen transferred between Apple’s companies in Japan, Singapore and Ireland had not been correctly declared, and therefore were not subject to the correct tax.

Apple should have paid tax on some 60bn yen ($589m) worth of profits transferred between 2012 and 2014. According to the Japan Times, Apple is believed to have paid back the 12bn yen in full.

Apple’s Irish subsidiary had already hit the headlines recently, after being ordered to pay a record $13bn in back taxes to the country by the European Commission.

In the past few years, the commission has launched an offensive against harmful tax practices by member states and multinational corporations operating in the bloc.

Globally, a series of high profile, tax-related scandals, including Luxleaks, Swissleaks, and the Panama Papers, have sparked public outcry and put tackling tax avoidance at the top of the international agenda. 

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